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US Dollar

04-27-2011, 12:54 AM

What the hell are doing in the US the Australian dollar is $1.08 to yours and is killing us export wise the only people laughing are travellers and people buying plasmas and now inflation is on the rise here and interest rates will go up from 7% to whatever and china will take over the US GDP they say by 2016 its time to stop feeling sorry for yourselves and get moving.

Push sticks/blocks Save Fingers
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"The true measure of a man is how he treats someone who can do him absolutely no good."
attributed to Samuel Johnson
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PUBLIC NOTICE: Due to recent budget cuts, the rising cost of electricity, gas, and oil...plus the current state of the economy............the light at the end of the tunnel, has been turned off.

Comment

Well, there's a couple of problems with the "Dollar". First off, as our debt gets evaluated, there's a bit of concern a to what our governments going to do about the so-called "debt ceiling"..... if Congress and it's attitudes decide to NOT raise the "debt ceiling", then we could very well look to the world like we are going to default on those kazillions that we owe everybody. (And likewise, if this country doesn't get it's act together we're going to be the most indebted nation in world history, if we arent all ready.)

But, for the moment our economy IS picking up and to a lot of the "world" we are still an envied economy and have the potential to paying down our debt and therefore are still, an imagined good investment. But of course when the people of the world worry about that potential the "Dollar" looses it's value, at least in thier minds.

The other thing is that when the U.S. Dollar is strong, well all of us Americans are ever greedy to buy almost anything foreign.... including factories, land, workers, and raw materials.

When the Dollar is weaker, life gets a little tougher for us as all those foreign goods go up on price and seeing that almost everything we buy, including much of our food, comes from "elsewhere" our wallets really take the bite. The flip side of course is that the rest of the world can better afford to take nice economical advantage and start spending their money in the U.S. Everything from cars to vacations get much cheaper and so-does "investments" by foreign manufacturers, who can then build factories here to take advantage of our "cheap labor".

From my point of view (limited by my own life experiences), a really strong dollar is almost as bad as a really weak dollar.

Comment

What the hell are doing in the US the Australian dollar is $1.08 to yours and is killing us export wise the only people laughing are travellers and people buying plasmas and now inflation is on the rise here and interest rates will go up from 7% to whatever and china will take over the US GDP they say by 2016 its time to stop feeling sorry for yourselves and get moving.

Tony

Tony, what the hell we are doing is printing money. The reasons we're doing this are:

(1) In the US, the Govt is virtually owned by the financial industry via our campaign finance and lobbying systems which amount to legalized bribery.

(2) The Govt and financial industry jointly created a huge housing bubble. A lot of money was made by private banks that made the loans, then sold many of them, or the risk asssociated with them, off through derivatives. The bubble itself was created a combination of regulations that forced loans to be made to people that couldn't qualify, and mostly) by the Federal Reserve forcing low interest rates that enabled monthly mortgage payments to be unrealistically low. The only way to maintain low interest rates is to print money. This expands the money supply, which is the actual definition of inflation. Price increases lag money supply inflation. We're starting to seethose price increases now.

(3) The 2008 subprime collapse was just the tip of the iceberg. Subprime loans are bound to be the first to fail because those people can't afford those loans in the first place. Continued economic stagnation in the US means that the pressure on home loans has gotten much worse. If housing declines further, many, many banks will fail. The fact is, if this happens, the US will suffer a huge decrease in the money supply. This is the "deflation" that Ben Bernanke continually warns about. If it happens, we will plunge into a massive depression. Bernanke is not being honest with the People, but he is right about the threat of a real banking collapse. Because of the size and influence of the US economy, we will take a good part of the rest of the world with us. China and other countries that actually produce exportable goods will come out of it. Here is the US, where we have abandoned our means of production in favor af cheap imports, we will have a very large problem.

(4) To keep this from happening, the Federal Reserve has been pumping money into the economy nonstop. They dropped the fed funds rate to historic low levels and instituted "quantitative easing" QE to control longer term interest rates. The effect is that the money supply has skyrocketed, which is what they are trying to do. Home prices are essentially directly ties to the monthly payment amount, so keeping interest rates low props up housing prices.

(5) At the same time, incredibly irresponsible politicians have gained election and re-election by massive govt giveaway programs and a bloated defense budget. The Govt is also engaging is wars, extending unemployment benefits, and in reality doing anything but curbing spending. This is not by accident. We currently owe $13T, roughly equal to the GDP. But unfunded liabilities due to entitlement obligations, war debt and future deficit spending projections place the actual deficit between $50T and $100T over the next 30 years depending on whose estimates you believe. The US collects about $1T in personal income taxes per year. Total Govt revenue is about $2T. We are not ever going to be able to pay off this debt, because if you look at the total annual deficit, every year it increases more than the US Govt collects.

(6) If interest rates increase significantly, the sad fact is that the US will very soon become unable to pay the interest on the debt. If this happens, the US could, in theory, default on its debt. This is one of two reasons why foreign govts are not buying US Govt securities. It is also why Standard and Poor's, just last week, degraded the US's long-term creditworthiness rating from "stable" to "negative". As usual, S&P was a little late in this... about 40 years late.

(7) The reality is, the US Govt will never actually default. They will just print money to pay the debt. They're doing it right now, to keep interest rates low since that's also needed to prop up the housing market. This is the other reason other countries don't want to buy US securities any longer. They know that even if they are paid back, it will be in dollars that are worth far less than the dollars they loan us.

(8) Many in the House and Senate are truly clueless. But there area some that are not. They know what they're doing. All this printing money devalues the currency. This is the strategy the US is using to deal with its debt. We are planning to inflate it away. Unfortunately, what isn't well understood is that 2/3 of the debt is not held by foreign countries. It's held by us. The American public holds most of the debt in their IRAs, 401ks, and other investments. Between this and the fact that American's ssaving are typically held in dollars or dollar based assets, the devaluation of the US currency is a tax - a massive one - on the American people. The bad news for the US Govt and Federal Reserve is that this won't work. It's been tried before many times in history and has always caused the problems to worsen - often to the point of collapse. Of course, it has to fail if you think about it. The Govt is killing the goose - the American people - that lays the golden egg. Look at the dollar index over the past year, and also the cost of commodities such as oil, agricultural futures, precious metals, and base (industrial) metals. Also look at stocks. All of them are rising tremendously. If all of these are going up, and the economy is stagnating (as ours is) this says that the dollar is losing value.

(10) Speaking of killing the goose that lays the golden egg, the US persists in maintaining the largest corporate tax rate in the world and the most stifling set of regulations in the world. Worse than Communist China. The export of US jobs overseas is only related to their low labor costs in a secondary way. The lower productivity and higher cost of doing business overseas negates the lower labor cost. US firms go overseas to escape taxes, payroll taxes and expensive over-regulation. The Demos don't want to deal with this, choosing instead to demonize private firms. The Republicans want to lower corporate taxes. Neither approach is going to help. The solution is to close the loopholes that enable corporations to escape paying taxes, but give them a 0% tax rate for profits derived entirely from domestic operations. The tie to domestic prduction is what the Repubs are missing. If the Govt did this, they would see jobs FLY back to the US, factories will go up at warp speed, and the jobs problem would be solved in 5 years. And since Americans would be paying taxes on thier income from all the jobs, treasury revenue would increase and put us back on the track to growth.

(9) Because of the size of the US economy, the status of the dollar as the world's reserve currency, and the fact that we import most of our consumption, our current policies are in essence exporting inflation. That's what you're seeing, Tony. China is seeing the same thing - their inflation is running wild. However, they are positioned to do something about it, and it won't be pretty.

So that's what we're doing.

Silver is up from a low of $26 in Jan to $46 today, just over 3 months later. Gold is up from a low of $1310 in Jan to $1505 today. We all know what oil has been doing. These increases are largely driven by other countries that are taking their store of US dollars, which they see as losong value on a daily basis, and trading them for gold and silver - hard money.

EDIT: CWS, the debt ceiling WILL be raised. There is no choice. All the noise is political grandstanding. The debt ceiling is related to meeting existing obligations, not future debt. They have to raise it to avoid default, and, mark my words, after all the feathers fly, the debt ceiling will be raised.

I beg to differ with you about the US being an envied economy. Our standard of living is recognized as high, but the world does not see the US as a strong economy. They aren't standing in line to buy US dollars, are they? No. All it takes is a look at commodity prices and the dollar index to see that confidence in the US economy is at an all time low. The strong currencies are related to the economies that produce, and have conservative monetary policies - rather than those that are attempting to print their problem away. We are not considered a good investment - anything but. World economies are flying away from the US dollar, except for those that are riding the stock market hoping to cash in on the bubble before it pops. Traditionaly, the US dollar has been considered a safe haven currency during times of global uncertainty... but that isn't the case today. Look at the decline of the dollar over the past year. It's right there on the chart. The world is flying to gold, silver, oil and other hard commodities as safe havens, not the US dollar. You would have to be nuts to go to the dollar in light of US gov't and Federal Reserve policies.... it's on the decline with no hint that it's close to a bottom. The world sees the US bickering over $38B which represtns fly specks in the total picture. Also, the US economy is "picking up" precisely because the government and the Federal Reserve is pumping money into it as fast as they can. It's all a house of cards. Stats show that income is declining. Unemployment is looking better, but not if you consider those that the Govt statistics ignore, and epecially not if you consider those that have found jobs but are being paid less than they were. Why do you suppose the Federal Reserve continues their lose money policies in light of the obvious increases in prices that everyone is experiencing? They cite their CPI numbers (which you should research if you haven't already to understand how distorted they are) to "prove that inflation is under control, but I think most Americans are seeing everything from food to energy to healthcare costs skyrocket. If the Govt and the Fed tuned off the money faucet, the economy would sputter. That's why they can't do that, espeially in an election year. No, the economy is not doing well when you look at all these factors and realize that the massive continued increase in the money supply is the only thing propping it up. All that is really happening is that we are being set up for an even harder fall.

A strong dollar is exactly what we want. A weak dollar is being promoted by those that are trying to pull the wool over the eyes of the American public. America's heyday as the leading economy in the world, a leading exporter and the world's largest lender happened (from the end of WWII to the mid 1960s) while we had the strongest currency in the world, the highest wages in the world, AND the best standard of living in the world. We also had a gold backed currency and a policy that said that foreign countries to redeem their dollars for actual physical GOLD. Therefore, we COULDN"T print money like we do today. The notion that exports are helped by a weak dollar is ludicrous. Don't fall prey to the nonsense that says otherwise. The proponents of this nutty idea are simply trying to spin an illusion while they manipulate monetary policy to inflate away debt and transfer wealth from those that create it - the American working person.

And yes, we are already by far the most indebted nation in history. We were able to get there because of cooperation between central banks, al of whom could care less about national boundaries, and the fact that we have enjoyed and taken advantage of reserve currency status. The US economy is 70% consumption related. China is set to overtake our manufacturing production this year. But the reality is that they have been holding the valuation of their currency artificially low to promote their massive exporting and growth of their domestic industry. Since valuation is in dollars, this values their maufacturing output at far less than it is really worth. If this wasn't the case, they would have overtaken US manufacturing output several years ago.

Comment

"(10) Speaking of killing the goose that lays the golden egg, the US persists in maintaining the largest corporate tax rate in the world and the most stifling set of regulations in the world. Worse than Communist China. The export of US jobs overseas is only related to their low labor costs in a secondary way. The lower productivity and higher cost of doing business overseas negates the lower labor cost. US firms go overseas to escape taxes, payroll taxes and expensive over-regulation. The Demos don't want to deal with this, choosing instead to demonize private firms. The Republicans want to lower corporate taxes. Neither approach is going to help. The solution is to close the loopholes that enable corporations to escape paying taxes, but give them a 0% tax rate for profits derived entirely from domestic operations. The tie to domestic prduction is what the Repubs are missing. If the Govt did this, they would see jobs FLY back to the US, factories will go up at warp speed, and the jobs problem would be solved in 5 years. And since Americans would be paying taxes on thier income from all the jobs, treasury revenue would increase and put us back on the track to growth."

Andy, as time goes by I find more reasons our dollar and country are in serious trouble. I think we need some tax revenue from American based businesses as well as the jobs they provide. The thousands of once American based businesses left for mexico and elsewhere to avoid taxes, high labor costs and the EPA and OSHA. We could legislate to force them back through high tarrifs on imported goods, but it's not that easy.

I believe we need to accept a different understanding and application regarding capitalism. I am not suggesting an equal share approach as in idealistic communism, but rather a sensible look at where we are and how we could improve things. Put a cap on lawsuits, put a cap on individual pay and benefits from the lowest worker to the ceo. I don't think we can provide healthcare or higher education for the masses, we are in debt and broke!

I hate to say "I don't care" because I am a thoughtful person, but, if the choice is between American survivng or mexico, china and the rest of the world, I choose America. We need to stop employing brave young Americans to fight wars we can't afford, they should be employed in the private sector making the goods and technology we depend on. Our government needs to spend wisely, but collect taxes, not give tax breaks to people who are not creating jobs. Rich people are investing their money where it will grow and that is not America.

Illegal immigrants are costing us hundreds of billions a year, why can't our politicians agree on addressing this problem and once and for all, secure our borders? We are dealing with a laundry list of bad decisions and bad behavior at the top, so where do we start?

Finally, regarding our dollar and economy, I refuse to accept that with the brilliant economists in our country, we have to "try" things such as the stimulus package and this latest government make jobs/giveaway deal of high speed rails! There must be people with a full understanding of why we are in this situation and what must be done to turn it around, any plan that does not deal with these facts is flawed and doom to failure in my opinion.

Comment

I think we need some tax revenue from American based businesses as well as the jobs they provide. The thousands of once American based businesses left for mexico and elsewhere to avoid taxes, high labor costs and the EPA and OSHA. We could legislate to force them back through high tarrifs on imported goods, but it's not that easy.

Not only isn't it easy, it won't work. At one time I thought import duties were a good idea, but I don't think so any longer. The problem is, there are few alternatives to the imports in the vast bulk of the consumer goods arena. Duties and tarrifs are taxes, and they will be borne by the American public.

The only way that really makes sense is to make the climate attractive for business. These people that control companies are not devils. They are doing their job. And their job is to make money for their shareholders. Loopholes in the tax code enable them to set up shell operations in foreign countries and escape taxes, and they do it. They would be stupid not to. It's legal. If Government would simply stop helping the competition by making the US an unattractive place to operate, we would come out far ahead.

Remember that corporate profits are either reinvested in the company, which leads to growth, or distributed to the shareholders, who then pay taxes on the distribution. I have always considered this to be double taxation. Of course other tax loopholes enable company executives to vote themselves giant bonuses, and those loopholes need to be closed as well.

Problem with the politicians', and I mean Repubs in this case, attempts to lower corporate taxes is that it does not tie the tax cuts to domestic operations. If they simply cut taxes, Companies won't necessarily come back to the US. They will happily take the tax cut, and continue to profit by outsourcing production to offshore, foreign manufacturing companies.

...put a cap on individual pay and benefits from the lowest worker to the ceo.

You just killed what little is left of the economy. Wage caps remove incentive. This is why in the Soviet Union, they had full employment... but there was nothing to buy. The same thing happened in China. They relaxed that now, and look at what is happening. They are far more capitalistic in Communist China than we are in the United States.

Wage and price controls have been proven not to work. It's been tried repeatedly, in the US and other countries. It distorts supply and demand and results in chaos.

I don't think we can provide healthcare or higher education for the masses, we are in debt and broke!.

I agree with you on this 100%. Somehow we have come to believe that the Govt should provide healthcare, and that they should subsidize education. Neither has anything to do with Govt. In fact, the best thing that the Govt could do IMO would be force, by legislation, the decoupling of healthcare from employment. The two have nothing to do with each other. Even better, health insurance should be abolished in the US, with the exception of policies to cover major medical. Everyone should pay for their own routine health care costs. What we have right now is a massive wealth redistribution scheme. There is no accountability. We have $4000 per night hospital rooms, $20,000 bills when a kid breaks his leg, and drugs that cost thousands of dollars per month. This is the same pattern that is ALWAYS followed when insurance, whether private or Govt, takes over health care. Not just in the US, but worldwide. It simply doesn't work. I think if the government and the insurance companies could be dialed out of the equation, costs would come way down. Of course you're right about limiting lawsuits. Physicians annual malpractice insurance premiums cost more than the mean income of typical families... for several years. It's all gone berserk.

not give tax breaks to people who are not creating jobs. Rich people are investing their money where it will grow and that is not America.

Absolutely. This is another problem I have with the Repubs (and I am a lifelong repub). We have to raise taxes on the very rich. Obama is talking about those that make over $250k. That would affect a lot of us. But it really needs to be done. You are 100% right IMO.... the investments made by upper income folks don't accomplish a hill of beans in terms of job creation. And they won't. It's all just special interest politics, and in this case the Repubs are catering to their special interest. I'm in that group, but it doesn't make it right.

On the other hand, 47% of low income people pay no income tax. Yes, I understand that they don't make enough to offset the problem. But as a matter of principle, everyone needs to pay taxes. The real reason that this nonsense continues is because the politicians know that the low income people - and there are very many of them relative to the high earners - will vote out any legislator that suggests that they have to cough up a little bit. But that doesn't make it right. If you live here, you should have to pay.

Finally, regarding our dollar and economy, I refuse to accept that with the brilliant economists in our country, we have to "try" things such as the stimulus package and this latest government make jobs/giveaway deal of high speed rails! There must be people with a full understanding of why we are in this situation and what must be done to turn it around, any plan that does not deal with these facts is flawed and doom to failure in my opinion.

They know exactly what they're doing. No one seriously believed the stimulus was going to stimulate anything. The Government needs to spend, just like they need war, to keep pumping money out. Paying for this results in the an increase in the money supply, which is what they need to be able to deal with the debt.

We have a defense budget of $670B. That's 6 times what the next largest defense spender budgets. This doesn't include homeland security. Can any one seriously believe we need that much? Of course not. We could spend $200B, which would still be TWICE what anyone else spends, and still have by far the strongest military in the world.

They WANT to spend. Govt sponsored inflation is how they are going to deal with the debt. The irony is, We the People hold 2/3 of that debt. The Govt is not your friend. The Constitution is your friend, but the Govt ignores it... and gets away with it.

Comment

"Not only isn't it easy, it won't work. At one time I thought import duties were a good idea, but I don't think so any longer. The problem is, there are few alternatives to the imports in the vast bulk of the consumer goods arena. Duties and tarrifs are taxes, and they will be borne by the American public.

The only way that really makes sense is to make the climate attractive for business. These people that control companies are not devils. They are doing their job. And their job is to make money for their shareholders. Loopholes in the tax code enable them to set up shell operations in foreign countries and escape taxes, and they do it. They would be stupid not to. It's legal. If Government would simply stop helping the competition by making the US an unattractive place to operate, we would come out far ahead.

Remember that corporate profits are either reinvested in the company, which leads to growth, or distributed to the shareholders, who then pay taxes on the distribution. I have always considered this to be double taxation. Of course other tax loopholes enable company executives to vote themselves giant bonuses, and those loopholes need to be closed as well.

Problem with the politicians', and I mean Repubs in this case, attempts to lower corporate taxes is that it does not tie the tax cuts to domestic operations. If they simply cut taxes, Companies won't necessarily come back to the US. They will happily take the tax cut, and continue to profit by outsourcing production to offshore, foreign manufacturing companies."

Andy, I don't demonize ceo's for leaving the USA and making as much profit possible. I simply don't believe we can make the climate attractive enough and still have an America. If you cut corporate taxes, you are still left with higher wages, OSHA and the EPA. We can't survive as a nation of stockholders profitting from outsourced jobs. I agree that the vast majority of our consumer goods are imported and I see that as a big problem that must change. Andy, fishing is not illegal in many places and yet we are seeing the oceans decimated. Just because it is not illegal to make limitless profit, does not mean it has a good result when taken to it's final conclusion.

Big oil is not breaking any laws by raising the price of gasoline and heating oil, but the results of their business model is people spending less to support other businesses which leads to unemployment. My suggestions may be considered unAmerican, or unfair, I think unrestricted profit which leads to a declining economy is unAmerican. The bottom line for me in most of these scenarios is what works and what doesn't . Thousands of once American based companies that supported the tax base and employed Americans, leaving the USA to make more profit and escape government agencies that monitored worker safety and the environment, is not working for our economy. Our government going into debt with any country is a bad idea and with a 15 trillion dollar deficit, it does not work! Allowing open borders for drug traffic and millions of illegals who do not support the tax base but burden our economy, does not work!

Unfortunately, regardless of our thoughts and arguments, I do not see our politicians joining forces to do what needs to be done whatever that may be.
Our country is in a crisis and our President is busy campaigning! The big news story is the royal wedding! Does anyone else smell the smoke as the fiddle plays?

Comment

Our country is in a crisis and our President is busy campaigning! The big news story is the royal wedding! Does anyone else smell the smoke as the fiddle plays?

Yup.

But what I'm really smelling is money. Silver is up from its year low in January of $26, to over $48 as I write this. That's 85%, in just over 3 months. That's over 300% per year. No we're not going to see 300% from silver by New Year's, but don't be surprised to see $70. Compare that to your savings account. Gold has been steadily rising for 10 years, and currently is at an all-time high. Some think this is a bubble. I don't... adjusted for inflation, and in light of the continued devaluation of the dollar, the real price of both these still has a lot of headroom. Gold will hit $1650 to 1800 this year... unless we default or lose reserve currency status, in which case it will go much higher.

If you can't beat 'em, at least make sure to collect some profit before your hard-earned dollars become worthless.

Comment

What the hell are doing in the US the Australian dollar is $1.08 to yours and is killing us export wise the only people laughing are travellers and people buying plasmas and now inflation is on the rise here and interest rates will go up from 7% to whatever and china will take over the US GDP they say by 2016 its time to stop feeling sorry for yourselves and get moving.

Tony

Hey, take it easy on us. Everyone else in the world hates us for being too big and rich, so we are trying to get to third world status as fast as we can.

Comment

Hey, take it easy on us. Everyone else in the world hates us for being too big and rich, so we are trying to get to third world status as fast as we can.

Go

O please don`t do that where would we be without you crusing the world in your big ships protecting we the little people from the wolves that are out there and saving us the monies we would have to spend on defence that we have become accustomed to spending on ourselves if you did become a third world country you would be entitled to foriegn aid and the UN world be able to organise it through the world bank which if I am not mistaken is owned by the US so my advise is to print more money.?